Wednesday, July 01, 2009

With California just a few days away from having to issue IOUs to pay its bills, California Governor Arnold Schwarzenegger is threatening to shut down the state rather than agree to $2 billion worth of new taxes on cigarettes and alcohol and oil companies that Democrats have proposed to help close the Golden State's $24 billion budget deficit.

This shortsighted and fiscally irresponsible stance is out of step with the majority of California voters who support these taxes and a tad hypocritical, since Schwarzenegger himself proposed these very solutions at the end of last year.

If Schwarzenegger believes that it is possible to balance the state budget without these revenue solutions, as paltry as they are, then he just doesn't understand economics.

Should he actually follow through on his threat to veto the Democratic plan, which also includes $11 billion worth of cuts and $10 billion worth of accounting maneuvers, blame for shutting down the state would rest squarely on his shoulders.

While Schwarzenegger has been prone to using threats, coercion, and other ham-fisted approaches to realize the vision of a state with no capacity to provide social or educational services to the citizens of California, it is unclear whether he actually has the courage to take the blame for shutting down the state.

The only way to win this game of budget chicken and avert the prospect of California taking its place among the Third World, an outcome that corporatists of both political stripes have been planning for decades, is for the Democratic majority to concede nothing and to place a budget on Schwarzenegger's desk that includes new revenues.